Stemming the surge in superannuation costs

The cost of providing universal superannuation has been contentious for decades. As the 65+ population grows, so does the already considerable costs.

Attempts have been made in the past to make changes.

UnitedFuture tried to nudge National towards ‘flexi-super’ where people could choose the age they started to get super (with varying rates) a couple of terms ago. National fobbed this off by allowing an investigation that was always going to achieve nothing under John Key’s leadership.

In 2013 Labour proposed an increase in the age of eligibility to 67 but got hammered by the left so dropped their proposal. With NZ First holding the balance of power there seems no way that the age will be increased this term.

But a NZ First MP has proposed a change that will cut the costs.

ODT: Cutting cost of superannuation

Last month, a New Zealand First private members’ Bill in the name of MP Mark Patterson, who is based in Clutha-Southland, was put forward. It proposes increasing the minimum residency requirement from 10 to 20 years after the age of 20, so a childhood in New Zealand would not count. The current 10-year law only stipulates five of those must be after the age of 50.

Given the last National-led government proposed an increase to 20 years, there should be sufficient support for a Bill to pass. Mr Patterson cites Berl research which says the change to 20 years could save $4.4 billion over 10 years.

That will only reduce the ongoing costs slightly.

And it’s fair to ask why NZ First staunchly defend the age of eligibility for non-immigrants while they want to toughen things up for immigrants.

But is even 20 years enough? The 2016 policy review by retirement commissioner Diane Maxwell recommended 25 years, noting an average in the OECD of 26. Any change would not apply to those living in New Zealand now. She calls for action now in part because of the time lag. Superannuation cost $30 million a day and that would rise to $98 million in 20 years’ time, she said.

The 10-year rule goes back to 1972. Most migrants were from Britain and the UK state pension could be taken off NZ Super. But these days many come from the likes of China where there is no state pension. There is a clear monetary incentive for Chinese residents to try to bring out their parents under family reunification. After only 10 years they can be receiving this country’s state pension, as well as public healthcare.

It may look racist trying to double the residency requirement now there are proportionally a lot more Asian immigrants, but a lot of other things have changed since the 1970s. The age of eligibility was increased from 60 to 65 in the 1990s.

Twenty years is still a long time. To be eligible for super at 65 you would have to be resident in New Zealand by age 45.

How else can the increasing cost of superannuation be limited? Or should it?

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6 Comments

  1. Geoffrey Monks

     /  November 2, 2018

    When I started out, the “Old Age Benefit” was a prepaid pension secured through a Social Security tax. When the State plundered that large investment it promised to maintain the asset by setting aside funds from general revenue. It didn’t of course. Now there is a problem – where the people have continued to invest in their future through taxation, the State has continued to misdirect those funds. Done as promised, the taxpayers of today would by default present for the benefit at that time when they cease to pay for it.
    Had the first Minister who proposed “borrowing” from our fund been told to piss off, I doubt that we would now be invited to re-create it.

    Reply
  2. Blazer

     /  November 2, 2018

    some new immigrants have perfected the art of granny dumping’

    sponser parents,promising support and then… ‘son gone overseas…got no money…please help’!

    Reply
  3. Kitty Catkin

     /  November 2, 2018

    I read today that Holland’s super is 100%+ of the average wage; how can this be? It can’t be all paid by taxpayers unless they have massive taxes.

    Reply
    • Geoffrey

       /  November 2, 2018

      It is paid forward by their contributions over a working lifetime and enhanced by prudent investment. Simple really.
      The problem is the misdirection of the investment in NZ and the bleat by the light fingered when it has been exhausted that “too many people are getting old!”

      Reply

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